Correlation Between Grupo Carso and Big 5

Can any of the company-specific risk be diversified away by investing in both Grupo Carso and Big 5 at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Grupo Carso and Big 5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Grupo Carso SAB and Big 5 Sporting, you can compare the effects of market volatilities on Grupo Carso and Big 5 and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Grupo Carso with a short position of Big 5. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Carso and Big 5.

Diversification Opportunities for Grupo Carso and Big 5

0.26

Correlation Coefficient

Grupo Carso  Big 5

Modest diversification

The 3 months correlation between Grupo and Big is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Carso SAB and Big 5 Sporting in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big 5 Sporting and Grupo Carso is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Grupo Carso SAB are associated (or correlated) with Big 5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big 5 Sporting has no effect on the direction of Grupo Carso i.e., Grupo Carso and Big 5 go up and down completely randomly.

Pair Corralation between Grupo Carso and Big 5

Assuming the 90 days horizon Grupo Carso is expected to generate 35.5 times less return on investment than Big 5. But when comparing it to its historical volatility, Grupo Carso SAB is 2.38 times less risky than Big 5. It trades about 0.01 of its potential returns per unit of risk. Big 5 Sporting is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  162.00  in Big 5 Sporting on September 20, 2024 and sell it today you would earn a total of  72.00  from holding Big 5 Sporting or generate 44.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Grupo Carso SAB  vs.  Big 5 Sporting

Grupo Carso SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Carso SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Grupo Carso is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Big 5 Sporting

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Big 5 Sporting are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Big 5 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Carso and Big 5

The main advantage of trading using opposite Grupo Carso and Big 5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Carso position performs unexpectedly, Big 5 can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Big 5 will offset losses from the drop in Big 5's long position.

The idea behind Grupo Carso SAB and Big 5 Sporting pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.